Detailed Answer
(b) The reduced carrying amount of Cranston’s assets
($920,000) should be accounted for as their new cost, and this amount should be depreciated over the remaining useful life of
five years. Restoration of previously recognized impairment
losses is prohibited. Therefore, Cranston should report .80 ×
$920,000 or $736,000 as the carrying amount of its impaired
long-lived assets on its December 31, year 4 balance sheet.